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Amazon offers workers $5,000 to quit, but it’s not crazy

Aaron Pressman
The Exchange
Why Amazon Pays Employees Up to $5,000 to Quit

On first hearing, it sounds almost insane – every year, Amazon (AMZN) offers workers in its distribution warehouses up to $5,000 to quit. Why would a company ask employees to quit and why in the world would it pay them to do so?

But like many of the unusual practices adopted under Amazon CEO Jeff Bezos, the pay-to-quit policy is grounded in data. The goal of the offer is to encourage unmotivated and disaffected employees to leave on their own, while making employees who reject the offer feel more dedicated to the job.

Delivered with the headline “Please Don’t Take This Offer,” the pay-to-quit offers start at $2,000 for an employee’s first year and rise by $1,000 a year up to a maximum of $5,000.

“The goal is to encourage folks to take a moment and think about what they really want,” CEO Bezos explained in a letter to shareholders this week. “In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.”

Creating a positive work culture

The original idea came from Zappos, a popular online shoe site Amazon acquired in 2009. Zappos CEO Tony Hsieh developed the pay-to-quit offer among numerous other policies designed to create a positive work culture at Zappos, which is known for fantastic customer service. The Las Vegas-based company has continued to operate independently since Amazon took over.

Zappos call-center reps have great leeway to please customers, to the point of recommending competitors’ websites when Zappos is out of stock of a product the customer wants. And even the driver who picks up job applicants at the airport delivers feedback on the candidate’s attitude. Hsieh wrote a book detailing his strategy, called “Delivering Happiness.”

Amazon says few employees actually take the offer. The company employed over 117,000 people at the end of 2013, most working in one of its 96 distribution centers around the world. Hsieh has said only 2% to 3% of his employees opt for the cash instead of their job.

Keeping employees motivated is a key challenge in environments such as retailing, call centers and other high-volume, low-pay workplaces. Zappos's efforts seem to have paid off, as higher employee morale generates better customer service leading to high customer loyalty.

"On the one hand, I love anything that encourages the people who are unhappy to leave and get out," says Suzanne Lucas, a 10-year corporate HR veteran who writes the Evil HR lady blog. But Lucas also worries that some people may quit for the money and later regret the decision. "When I did layoffs, there were always people who would volunteer for the package, get it and then call sobbing when the money ran out," she says.

A pay-to-quit policy can also improve hiring decisions, making sure companies look for people who will fit in, says hiring and recruiting consultant Josh Bersin, principal at Bersin by Deloitte. “I've talked with Zappos and others about this and it is a great idea,” he says. Hiring managers have to be “much more rigorous about assessment for fit, culture and capabilities.”

Some human-resources experts also question whether the pay-to-quit policy fits with the rest of Amazon’s employment practices in its warehouses; Warehouse workers have reported sometimes harsh working conditions. Amazon has denied charges of unsafe working conditions and noted its healthy pay increases for warehouse workers.

“What I’ve read about Amazon doesn’t suggest they have a similarly strong and singular culture,” says Ann Bares, a compensation expert at Altura Consulting Group. “You can’t become Zappos by simply copying one of their practices in isolation, though many organizations have tried.”